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Tuesday, May 19, 2009

Credit card trouble ahead

In general, I am all for the new credit card reforms, which will limit excessive fees, eliminate double-cycle billing, remove fees for paying online or by phone, and other good-for-the-consumer objectives.

However, banks and lenders are now threatening to punish good cardholders (like me) if the reforms go through, by assigning annual fees, charging interest from the moment an item is purchased, and cancelling reward programs.

I pay my credit card in full every month (even in months when I have to put $2,000 in tuition money on it!). I have never paid interest. I've never paid a late fee. I've never gone over my credit limit. I use my card for a lot of purchases, enjoy the protection extended (like insurance on rental cars), and use my reward points for gift cards to restaurants. If they make good on their threats to make this business relationship less rewarding for ME, what will I do?

My first preference would be that they'd get rid of rewards but continue to allow interest-free purchases if paid off within the month and not have an annual fee. At least then I would still use my card.

If they start charging an annual fee, with or without rewards, I might keep my current card and continue to use it.

If they start charging immediate interest on all purchases with no annual fee, I will not use the card anymore, and simply keep it open to keep my credit history and use it as a super-emergency fund (on top of the one I already have). If they started charging immediate interest AND had an annual fee, I'd probably find a new card and cancel this one.

2 comments:

I'm like you in that I've never paid interest and always pay my card in full.

If they started charging annual fees, or interest from the day a purchase is made I'd simply have to stop using the card. And that would suck for them, because I know they still make money from all of us out there that use our cards for daily purchases. They'd stop making money on those transactions. Even if they kept rewards, 1% wouldn't do it for me if they're charging me interest from day 1.

I guess I'd move back to checks since I still don't feel comfortable carrying large amounts of cash with me anywhere.

I really hope they don't do that, because it would be the end of credit cards for me.

I'd either just go to cash or checks. And I guess I'd use my debit card, though I absolutely hate doing that. I wouldn't continue to use the CC since I don't actually have to, but I would miss my rewards.

Spare Change

Welcome! I enjoy reading and writing about personal finance among other topics. I'm not here to give advice, so take anything I recommend with a grain of salt and after seeking legal, financial, or other professional advice.